Archive for August, 2011

For some time, telcos with broadband infrastructure have wrestled with the challenge of launching, delivering and marketing an IPTV offer. Not only do most players face competition from classical terrestrial providers, but widespread adoption of satellite and strong penetration of cable platforms in many markets mean that success can be hard to achieve.

This problem is compounded by the fact that IPTV is a demanding service for broadband infrastructure. Of course, it can be delivered successfully, but it needs the right next-generation access infrastructure, as a recent note from Arthur D Little points out. To complicate matters further, the rise in HD TV places even more demands on the network.

Consequently, Arthur D Little expects that IPTV may grow only modestly in some markets, being largely restricted to urban areas. And that’s a problem, for classical telcos are eager to develop quad-play offers and to deliver broadcast content and associated services in order to compete with cable or satellite rivals who are able to do so more cheaply and more effectively.

But telcos can take steps to optimise delivery over the network infrastructure available to them if they pay attention to the STB or the router. If they can optimise delivery of IPTV services such that they have priority over other solutions that consume the same bandwidth in the home, dynamically and in real-time, they may be able to ensure a better service, access more potential subscribers and get closer to securing a realistic market foothold.

To do this fully requires the ability to monitor and control traffic at the boundary of the customer premises – merely doing this inside the network, as current DPI-based approaches do, fails to differentiate the core service to the STB from consumption of similar traffic on other platforms. Once Telcos can ensure a service as reliable as those from cable or satellite providers, they can exploit the potential for personalisation that is uniquely theirs, and finally make inroads into this lucrative market.

A recent article by Tony Poulos of the TM Forum contained the following slightly contentious lines:

“Suggestions that those OTT entities that use up the most bandwidth delivering services to consumers take some of the responsibility and cost has, to date, fallen on deaf ears. There is the constant fear that any attempt to garner revenue from them will simply mean that they advise their own customers to change over to networks that don’t impose charges. What might be foreign to OTT players but is common practice in the telecom industry are inter-connect arrangements. It seems only fair that those that use the network resources should pay something for the privilege.”

Hmm. The logic is irrefutable, but how widely such a view will be accepted is another point. The problem is that this is an emotive subject and leads directly into debates about net neutrality, among other things. However, that’s not to say it should not be discussed.

As we have noted, deployment of the high-speed broadband networks that consumers and enterprises are demanding requires investment. Investors typically expect to secure a return – if there is no way of passing the various investment criteria used, the investment simply won’t happen.

This has nothing to do with net neutrality per se. Rather, the issue of how carriers and network operators make money is central to the future of the digital economy. We all want to see faster and faster networks, but few understand the need to pay for them. This issue needs to be resolved quickly.

Network investment is for the long term. It needs the kind of returns that make it profitable, while ensuring that access is not for the few or privileged. It’s a difficult path to tread, but Mr Poulos is right: the industry needs to act now to secure its future. However, if it is going to do so, it will need the tools and capabilities to ensure that access to network resources is fair and according to the appropriate policies.

This requires more than just a PCRF and DPI solutions. It needs a comprehensive, end-to-end infrastructure that can help fully monetise the network and ensure fair and realistic charging and value generation – both for consumers and, potentially, for OTT players.

An alarming headline caught the attention recently. Juniper Research published a report that suggested a “nightmare scenario” for mobile network operators in which rising costs exceed revenues – eliminating the potential for profit in a little over 2 years.

Of course, this is only one possible scenario, but as Juniper points out, both OPEX and CAPEX for MNOs appear to be rising, while margins continue to be squeezed. But, it serves an extremely useful purpose – to focus minds and efforts on ensuring that such a catastrophic situation is avoided.

The prediction is largely based on current revenue models, which include flat rate pricing for many data plans. But these look increasingly untenable, as we and many others have remarked before. It’s clear that a more flexible approach is required in order to ensure the success of MNOs.

And, it’s also vitally important that the importance of the MNO is clearly understood: without MNOs, no-one else is going to build ubiquitous, high-speed wireless data networks – certainly not without expecting to generate a return on them somehow. And, if there is no incentive to build them in terms of potential profit, then they will not be funded from public expenditure as some sort of global commons.

We have to be realistic – if we want to continue to enjoy high-speed data access wherever we are and, in all likelihood, consume more and more of it, then someone has to pay for it. But, it’s clear that the current business model is broken. MNOs need to find ways to address this and, indeed, some of the solutions may change fundamental perceptions of data access. Changing flat-rate plans to account for usage is just one part of a spectrum of options open to MNOs.

The question is, whether such predictions will be ignored, or prove to be a spur to decisive action that helps MNOs adjust to a future in which growth is unpredictable and which requires considerable creativity in building price models and plans. Of course, the corollary of that is, how will they do it? Well, one answer is to ensure they have the tools and capabilities in place to monitor and control application performance from end-to-end across their network. And, just as we are some way from changing old business models, so too are we some way from that level of granular control.

This topic will run and run over the coming quarters, but it’s not one that can be swept under the carpet. If Juniper’s nightmare scenario is to be avoided, it’s time to take action. Suddenly, 2015 doesn’t seem that far away.